NEW ERA OF TAXATION DUE TO GST

The Finance Minister Nirmala Sitharaman has mentioned that Goods and Service Tax (GST) has decreased the rate at which people need to pay tax, this has doubled the taxpayer base to 12.4 million. As we all know GST was introduced in the year 2017, before this there were various taxes which included value-added tax (VAT), excise, sales tax and more. There were a lot of disadvantages to numerous taxes. One such drawback was the cascading effect, because of which it resulted in a high standard rate of tax up to 31 percent. To overcome this GST was introduced. Now GST is widely accepted and GST is indeed both consumer and taxpayer friendly. The Ministry said high tax rates during the pre GST era acted as a deterrent to tax paying whereas lower tax rates under GST have helped to increase tax compliance. The total number of assessee covered by GST during the time of its inception was around 6.5 million, but currently, the assessee base has crossed 12.4 million, which is indeed a huge number. When GST was initiated, the rate of tax on a large number of goods was brought down. Now 28 percent is almost limited to sin and luxury items. Out of a total of about 230 goods in the slab, about 200 have shifted to lower slabs. 

The Ministry said as per RNR Committee the revenue-neutral rate was 15.3 percent. The present weighted GST rate according to RBI is only 11.6 percent. The Ministry further said that a significant relaxation has been extended to the construction sector, specifically the housing sector, which has now been placed at the rate of 5 percent. Now Businesses with an annual turnover of up to Rs 40 lakh are exempted from GST, initially, this limit was Rs 20 Lakh. Those Businesses with turnover up to Rs 1.5 crores can opt for Compensation Scheme and pay only 1 percent tax.